(X.) United States.—In the United States, though the basis of the law of partnership was the English common law, there have been significant legislative changes dealing with partnership rights and liabilities. Prior to 1914 the legislation was special in character and numerous diversities were to be found in the law of the various States. In that year the conference of commissioners on uniform State laws approved a draft act for a uniform partnership law which has since been adopted by the legislatures of about one third of the States. Two divergent legal theories as to the nature of the partnership had been developed by the American courts, one adhering to the old common law conception that the partnership was simply an aggregate of individuals, and the other building up the newer conception that the partnership existed as an entity distinct from the partners. In the divergent problems peculiar to the United States and centring in the enforcement of a judg ment obtained against a partnership in one State as against part ners resident in another State, the issue between the entity and aggregate theory of a partnership has become a problem of impor tant legal significance.
The Uniform Partnership Act, with some exceptions, is an attempt to codify the existing common law on the subject of partnership. In its major provisions it conforms with the law as found in the English Partnership Act. Like the English act its provisions must be read in the light of the earlier common law decisions. The tests for establishing the existence of a partner ship are essentially similar to those in the English act, though greater emphasis is laid upon the fact of the sharing of the profits of a business as being an indication that such person is a partner in the business. The act lays down no limit as to the number of persons that may comprise a partnership nor-the types of business in which a partnership may engage. Such limitations may, however, be commonly found in other legislation. Partners are the agents of the partnership to carry on the partnership busi ness but specific authority from all the partners must be had in order that a partner may bind the partnership in a limited class of transactions. Partnership liability in contract is made joint, but in tort is joint and several. Prior to the act there had been a manifest tendency in the various States to make all partnership obligations joint and several. The act restores the common law rule. Partners may be created by estoppel, as where a person gives credit to a partnership upon the representation by one who is not a partner but represents himself or consents to others repre senting that he is a partner. In contradistinction to the English rule a person admitted to the partnership is liable to the extent of the partnership property for any liabilities incurred before he became a member.
The relations of the partners to one another are substantially those prevailing in England. Liberal variations of these rights by mutual agreement between the partners are permitted. The fiduci ary relationship between the partners is retained with full vigour. The extent of partnership property and its devolution upon the death of a partner are regulated in detail. Assignment of a part ner's interest does not operate to dissolve the partnership. In the dissolution and winding up of a partnership, the act even more closely follows its English model. The causes for dissolution are identical, notification of dissolution to third parties is essential in order that the limited authority of any partner to bind the part nership shall be effectual. Special provision is made for the con tinuation of the partnership business with the aid of the partner ship assets in cases where the dissolution is caused in contra vention of the partnership agreement, those partners who have not wrongfully caused the dissolution being permitted to carry on the business.
Limited partnerships are wholly a creation of statute law, originating from the need of new commercial ventures for in creased capital. In 1822 New York passed the first statute per mitting their creation. It was followed by similar legislation in other States. The desire of the legislatures, however, to safe guard the interests of persons dealing with an association and relying upon the individual liabilities of the associates as well as the joint assets, led them to subject the limited partner to an un limited liability for the slightest infraction of the statutory rules. By the Uniform Limited Partnership Act drafted in 1916 and since then enacted by almost a third of the States, the limited partner was given a greater protection. Such legislation has undoubtedly stimulated the organization of limited partnerships. To give pub licity to the limitation of liability, a device of registering that fact is employed together with complete details as to the organ ization of the partnership. The limited partner is given the char acter of an investor rather than a general partner and does not participate in the management of the business. No limitations exist as to the character of the business that can be conducted by a limited partnership, except as other special legislation excludes this form of associate enterprise from particular enterprises.
See Burdick, Law of Partnership (3d ed. 1917) ; Warren, Corporate Advantages without Incorporation (1929) ; Magruder and Foster, "Jurisdiction over Partnerships," 27 Harvard Law Review, 793 (1924). (J. M. LA.)